Herbalife Settles Federal 'Pyramid Scheme' Lawsuit with $15 Million

Herbalife has agreed to pay $15 million to settle a class action lawsuit brought by one of its former distributors in California. Herbalife was accused of running a pyramid scheme. Critics have long questioned Herbalife's sales tactic because distributors' compensations not only depend on how much they sell, but more on how many sales people they recruit. The most prominent critic, Bill Ackman, wagered over a billion dollars in short positions against the nutrition supplement maker. The FBI and several states' authorities had opened investigations in Herbalife. U.S. District Judge Beverly Reid O'Connell ruled in Los Angeles that the plaintiffs against Herbalife may join together in a class-action suit. The $15 million settlement is pending court approval in December. As part of the settlement, Herbalife will not admit any wrongdoing. The company says it will probably be sanctioned by the Federal Trade Commission, but it will not shut down.